Billabong posts $275.6m net loss for year

TROUBLED Gold Coast-based surf wear company Billabong has posted a net loss after tax of $275.6 million for 2011-12.

The result was a large drop on the $119.1 million net profit Billabong reported for 2010-11.

Billabong said this morning it expected the current challenging trading conditions to continue in its 2013 financial year.

It said assuming there was no deterioration in the conditions, earnings before interest, tax, depreciation and amortisation (EBITDA) was expected to be between $100 million and $110 million, in constant currency terms.

The company’s EBITDA for its 2012 financial year was $84 million, excluding contributions from its recently sold Nixon brand and significant and exceptional items.

Billabong, which is the subject of a takeover offer from private equity group TPG, said its improved earnings would come on the back of its transformation plan, also unveiled today.

Billabong CEO Launa Inman said: ”At an underlying trading level, the group remains profitable.

”As previously flagged to the market, the group’s results have been adversely impacted by various significant and exceptional items.

”The group is well on track in implementing the initiatives outlined in the previously announced strategic Capital Structure Review and will continue to implement a number of new strategic initiatives announced today as part of Billabong’s transformation strategy.”
A major revamp of the company’s websites to promote online sales of its new youth surf, skate and snow brands will be accompanied by a slashing of unpopular products. As well, another 82 underperforming stores will close.

It will standardise the look of its stores and appoint a new global brand manager to unite its design teams in Australia, France and the US, as takeover talks with private equity firm TPG continue.

TPG is carrying out due diligence on Billabong International after it made a $1.45-a-share takeover bid for the retailer in late July.

Releasing her much-anticipated plan to turn the surfwear giant around and return the company to positive growth, CEO Launa Inman said her aim was to restore Billabong as the “premier youth brand in the world”.

“Billabong is a great company (but) there remains a lot of hard work ahead of us to return the Billabong Group to its former position,” she said.

Ms Inman admitted the company’s ill-conceived move into the retail market left much to be desired, leaving it battered by a global slowdown in its major overseas markets and allowing young up-and-coming youth brands to eat into its market share.

But she said the company’s research showed the brand was still “one of the most loved brands in Australia”.

The transformation strategy will see a further 82 stores closed globally throughout 2013.

The company will continue selling off old stock and the number of existing product lines will be cut.

“We have more than 25,000 styles we produce on an annual basis,” Ms Inman said.

“What shocked me most was that we identified 34 per cent of our styles give us 1 per cent of our sales.”

She said the number of product styles would be cut by 15 per cent this year, then another 15 per cent if this proved successful.

Billabong will also begin a major push into online retailing, launching its own online platform and expanding and integrating the Surfstitch brand it owns in Australia and Swell in the US.

The company’s core business will also be simplified to concentrate on Billabong and push the RVKA, Decline and Element brands.


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